Cross-Border Regulatory Spillovers: How Much? How Important? What Sectors? Lessons from the United Kingdom

26 Pages Posted: 6 May 2016

See all articles by Bob Hills

Bob Hills

Bank of England - International Finance Division

Dennis Reinhardt

Bank of England

Rhiannon Sowerbutts

Bank of England

Tomasz Wieladek

Bank of England

Date Written: April 22, 2016

Abstract

This paper forms the United Kingdom’s contribution to the International Banking Research Network’s project examining the cross-border spillovers of prudential policy actions, where each participant in the network uses proprietary bank-level data available to central banks. We examine whether UK-owned banks’ domestic lending is affected by prudential actions in other countries where they have exposures. We also examine the impact of a change in prudential policy in a foreign-owned UK-resident bank’s home jurisdiction on its lending to the United Kingdom. Our results suggest that prudential actions taken abroad do not have significant spillover effects on bank lending in the UK economy as a whole. But there are more granular effects: for instance, when a foreign authority tightens loan-to-value standards, UK affiliates of banks owned from that country expand their lending to UK households and corporates.

Keywords: Macroprudential policies, bank lending, spillovers, capital flows

JEL Classification: F32, F34, G21

Suggested Citation

Hills, Bob and Reinhardt, Dennis and Sowerbutts, Rhiannon and Wieladek, Tomasz, Cross-Border Regulatory Spillovers: How Much? How Important? What Sectors? Lessons from the United Kingdom (April 22, 2016). Bank of England Working Paper No. 595. Available at SSRN: https://ssrn.com/abstract=2776592 or http://dx.doi.org/10.2139/ssrn.2776592

Bob Hills

Bank of England - International Finance Division ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Dennis Reinhardt (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Rhiannon Sowerbutts

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Tomasz Wieladek

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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